Malaysian Federal Court rejects contract for influence-trading

The Federal Court has given its long-awaited judgment in Merong Mahawangsa Sdn Bhd v Dato’ Shazryl Eskay, ruling that Malaysian law treats contracts for influence-trading as contrary to public policy and therefore void.

The case concerned a major infrastructure project known as the “Crooked Bridge”. The project was abortive. However, businessman Shazryl Eskay claimed a fee for using his influence with (then) senior members of the government to secure the appointment of Merong Mahawangsa as contractor. The High Court of Malaya rejected the argument that an agreement of this kind was contrary to public policy, but dismissed Eskay’s claim on other grounds. The Court of Appeal overturned that ruling and gave judgment for Eskay. However, it did not deal with the public policy point. So that issue had to be brought before the Federal Court.

The Federal Court accepted that the Malaysian Contracts Act 1950 codified pre-independence English law, which regarded a contract for influence-trading as contrary to public policy. Since then the common law in England and elsewhere has universally continued to treat such contracts as void. To allow the enforcement of an agreement for influence trading would undermine the principle that public contracts should be awarded solely on merit, and would encourage corrupt practices. The court rejected as “preposterous” the suggestion that such practices are acceptable in Malaysia.

This decision will be welcome in the international legal community. By overturning the High Court judgment in these stark terms, the Federal Court has made clear that the common law sets its face against corruption no matter what the political circumstances in the jurisdictions it serves.